Cullumber Co. had 205000 shares of common stock, 20800 shares of convertible preferred stock, and $607000 of 10% convertible bonds outstanding during 2025. The preferred stock is convertible into 39200 shares of common stock. During 2025, Cullumber paid dividends of $0.56 per share on the common stock and $1.70 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. Cullumber's net income for 2025 was $360000 and its income tax rate was 35%. Diluted earnings per share for 2025 is O $1.47. ○ $1.55. O $1.31. O $1.37.

Cullumber Co. had 205000 shares of common stock, 20800 shares of convertible preferred stock, and $607000 of 10% convertible bonds outstanding during 2025. The preferred stock is convertible into 39200 shares of common stock. During 2025, Cullumber paid dividends of $0.56 per share on the common stock and $1.70 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. Cullumber's net income for 2025 was $360000 and its income tax rate was 35%. Diluted earnings per share for 2025 is O $1.47. ○ $1.55. O $1.31. O $1.37.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter16: Retained Earnings And Earnings Per Share

Section: Chapter Questions

Problem 10MC

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On July 2, 2018, McGraw Corporation issued 500,000 of convertible bonds. Each 1,000 bond could be converted into 20 shares of the companys 5 par value stock. On July 3, 2020, when the bonds had an unamortized discount of 7,400 and the market value of the McGraw shares was 52 per share, all the bonds were converted into common stock. Required: 1. Prepare the journal entry to record the conversion of the bonds under (a) the book value method and (b) the market value method. 2. Compute the companys debt-to-equity ratio (total liabilities divided by total shareholders equity, as described in Chapter 6) under each alternative. Assume the companys other liabilities are 2 million and shareholders equity before the conversion is 3 million. 3. Assume the company uses IFRS and issued the bonds for 487,500 on July 2, 2018. On this date, it determined that the fair value of each bond was 930 and the fair value of the conversion option was 45 per bond. Prepare the journal entry to record the issuance of the bonds.
Tama Companys capital structure consists of common stock and convertible bonds. At the beginning of 2019, Tama had 15,000 shares of common stock outstanding; an additional 4,500 shares were issued on May 4. The 7% convertible bonds have a face value of 80,000 and were issued in 2016 at par. Each 1,000 bond is convertible into 25 shares of common stock; to date, none of the bonds have been converted. During 2019, the company earned net income of 79,200 and was subject to an income tax rate of 30%. Required: Compute the 2019 diluted earnings per share.
Percy Company has 15,000 shares of common stock outstanding during all of 2019. It also has 2 convertible securities outstanding at the end of 2019. These are: 1. Convertible preferred stock: 1,000 shares of 9%, 100 par, preferred stock were issued in 2015 for 140 per share. Each share of preferred stock is convertible into 3.5 shares of common stock. The current dividends have been paid. To date, no preferred stock has been converted. 2. Convertible bonds: Bonds with a face value of 100,000 and an interest rate of 10% were issued at par on July 1, 2019. Each 1,000 bond is convertible into 35 shares of common stock. To date, no bonds have been converted. Percy earned net income of 54,000 during 2019. Its income tax rate is 30%. Required: Compute the 2019 diluted earnings per share. What earnings per share amount(s) would Percy report on its 2019 income statement?
Raun Company had the following equity items as of December 31, 2019: Preferred stock, 9% cumulative, 100 par, convertible Paid-in capital in excess of par value on preferred stock Common stock, 1 stated value Paid-in capital in excess of stated value on common stock| Retained earnings The following additional information about Raun was available for the year ended December 31, 2019: 1. There were 2 million shares of preferred stock authorized, of which 1 million were outstanding. All 1 million shares outstanding were issued on January 2, 2016, for 120 a share. The preferred stock is convertible into common stock on a 1-for-1 basis until December 31, 2025; thereafter, the preferred stock ceases to be convertible and is callable at par value by the company. No preferred stock has been converted into common stock, and there were no dividends in arrears at December 31, 2019. 2. The common stock has been issued at amounts above stated value per share since incorporation in 2002. Of the 5 million shares authorized, 3,580,000 were outstanding at January 1, 2019. The market price of the outstanding common stock has increased slowly but consistently for the last 5 years. 3. Raun has an employee share option plan where certain key employees and officers may purchase shares of common stock at 100% of the marker price at the date of the option grant. All options are exercisable in installments of one-third each year, commencing 1 year after the date of the grant, and expire if not exercised within 4 years of the grant date. On January 1, 2019, options for 70,000 shares were outstanding at prices ranging from 47 to 83 a share. Options for 20,000 shares were exercised at 47 to 79 a share during 2019. During 2019, no options expired and additional options for 15,000 shares were granted at 86 a share. The 65,000 options outstanding at December 31, 2019, were exercisable at 54 to 86 a share; of these, 30,000 were exercisable at that date at prices ranging from 54 to 79 a share. 4. Raun also has an employee share purchase plan whereby the company pays one-half and the employee pays one-half of the market price of the stock at the date of the subscription. During 2019, employees subscribed to 60,000 shares at an average price of 87 a share. All 60,000 shares were paid for and issued late in September 2019. 5. On December 31, 2019, there was a total of 355,000 shares of common stock set aside for the granting of future share options and for future purchases under the employee share purchase plan. The only changes in the shareholders equity for 2019 were those described previously, the 2019 net income, and the cash dividends paid. Required: Prepare the shareholders equity section of Rauns balance sheet at December 31, 2019. Substitute, where appropriate, Xs for unknown dollar amounts. Use good form and provide full disclosure. Write appropriate notes as they should appear in the publisher financial statements.
Crane Co. had 190000 shares of common stock, 20700 shares of convertible preferred stock, and $1540000 of 4% convertible bonds outstanding during 2025. The preferred stock is convertible into 40400 shares of common stock. During 2025, Crane paid dividends of $1.00 per share on the common stock and $3 per share on the preferred stock. Each $1000 bond is convertible into 30 shares of common stock. Crane's net income for 2025 was $605000 and its income tax rate was 35%. Diluted earnings per share for 2025 was O $2.33. # O $2.19. O $2.15. O $2.63.
Concord Corporation had 199000 shares of common stock, 20700 shares of convertible preferred stock, and $607000 of 9% convertible bonds outstanding during 2021. The preferred stock is convertible into 40200 shares of common stock. During 2021, Concord paid dividends of $0.55 per share on the common stock and $1.70 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $369000 and the income tax rate was 30%.Basic earnings per share for 2021 is (rounded to the nearest penny) $1.49. $1.29. $1.68. $1.54.
Oriole Company had 196000 shares of common stock, 19200 shares of convertible preferred stock, and $605000 of 11% convertible bonds outstanding during 2021. The preferred stock is convertible into 40000 shares of common stock. During 2021, Oriole paid dividends of $0.54 per share on the common stock and $1.80 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $359000 and the income tax rate was 35%.Diluted earnings per share for 2021 is (rounded to the nearest penny) $1.53. $1.36. $1.60. $1.40.
Waterway Industries had 200000 shares of common stock, 19300 shares of convertible preferred stock, and $592000 of 12% convertible bonds outstanding during 2021. The preferred stock is convertible into 39400 shares of common stock. During 2021, Waterway paid dividends of $0.55 per share on the common stock and $1.70 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2021 was $364000 and the income tax rate was 30%.Diluted earnings per share for 2021 is (rounded to the nearest penny)
Crane Co. had 195000 shares of common stock, 19300 shares of convertible preferred stock, and $1498000 of 6% convertible bonds outstanding during 2025. The preferred stock is convertible into 40400 shares of common stock. During 2025, Crane paid dividends of $0.80 per share on the common stock and $4 per share on the preferred stock. Each $1000 bond is convertible into 30 shares of common stock. Crane's net income for 2025 was $593000 and its income tax rate was 30%. Basic earnings per share for 2025 is O $2.44. O $2.65. O $2.52. O $2.32.
The Fontenelle Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $600,000 of 10% convertible bonds outstanding during 2018. The preferred stock is convertible into 40,000 shares of common stock. During 2018, Fontenelle paid dividends of $.55 per share on the common stock and $1.80 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2018 was $360,000 and the income tax rate was 30%. 1. Diluted earnings per share for 2018 is (rounded to the nearest penny)?
On January 2, 2025, Sheridan Co. issued at par $290000 of 6% convertible bonds. Each $1000 bond is convertible into 60 shares. No bonds were converted during 2025. Sheridan had 106000 shares of common stock outstanding during 2025. Sheridan's 2025 net income was $179090 and its income tax rate was 30%. Sheridan's diluted earnings per share for 2025 is $1.69. $1.59. $1.55. O $1.45.
PQ Co. had 200,000 ordinary shares, 20,000 shares of convertible preference shares, and $1,000,000 of 10% convertible bonds outstanding during 2021. The preference shares are convertible into 40,000 ordinary shares. During 2021, PQ paid dividends of $1.20 per share on the ordinary shares and $4 per share on the preference shares. Each $1,000 bond is convertible into 45 ordinary shares. The net income for 2021 was $800,000 and the income tax rate was 30%. Basic earnings per share for 2021 is (rounded to the nearest penny) Diluted earnings per share for 2021 is (rounded to the nearest penny)